Correlation Between Trent and SANOFI S

Can any of the company-specific risk be diversified away by investing in both Trent and SANOFI S at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Trent and SANOFI S into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trent Limited and SANOFI S HEALTHC, you can compare the effects of market volatilities on Trent and SANOFI S and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Trent with a short position of SANOFI S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trent and SANOFI S.

Diversification Opportunities for Trent and SANOFI S

0.37

Correlation Coefficient

Trent  SANOFI S

Weak diversification

The 3 months correlation between Trent and SANOFI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Trent Limited and SANOFI S HEALTHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANOFI S HEALTHC and Trent is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Trent Limited are associated (or correlated) with SANOFI S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANOFI S HEALTHC has no effect on the direction of Trent i.e., Trent and SANOFI S go up and down completely randomly.

Pair Corralation between Trent and SANOFI S

Assuming the 90 days trading horizon Trent Limited is expected to under-perform the SANOFI S. In addition to that, Trent is 1.27 times more volatile than SANOFI S HEALTHC. It trades about -0.03 of its total potential returns per unit of risk. SANOFI S HEALTHC is currently generating about -0.01 per unit of volatility. If you would invest  490,350  in SANOFI S HEALTHC on September 12, 2024 and sell it today you would lose (10,380) from holding SANOFI S HEALTHC or give up 2.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Trent Limited  vs.  SANOFI S HEALTHC

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Trent is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SANOFI S HEALTHC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANOFI S HEALTHC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SANOFI S is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Trent and SANOFI S

The main advantage of trading using opposite Trent and SANOFI S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trent position performs unexpectedly, SANOFI S can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SANOFI S will offset losses from the drop in SANOFI S's long position.

The idea behind Trent Limited and SANOFI S HEALTHC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.